Types of Banks prevailing in India

There are several types of banks in India, including:

• Public Sector Banks: Public sector banks are owned by the government of India and account for the majority of the banking industry in the country. Examples of public sector banks include State Bank of India, Punjab National Bank, and Bank of Baroda.
• Private Sector Banks: Private sector banks are owned by private individuals or companies and operate similarly to public sector banks. Examples of private sector banks include ICICI Bank, HDFC Bank, and Axis Bank.
• Foreign Banks: Foreign banks are banks that are headquartered outside of India and have a presence in the country. Examples of foreign banks in India include Citibank, HSBC, and Standard Chartered Bank.
• Regional Rural Banks: Regional Rural Banks (RRBs) are specialized banks that operate in rural areas of India. RRBs were created to provide banking services to rural areas and promote financial inclusion. Examples of RRBs include Punjab Gramin Bank, Baroda Rajasthan Kshetriya Gramin Bank, and Andhra Pradesh Grameena Vikas Bank.
• Co-operative Banks: Co-operative banks are owned and operated by their members, who are typically individuals or small businesses. Co-operative banks are focused on providing banking services to their members and promoting the economic interests of their communities. Examples of co-operative banks in India include Saraswat Bank, Abhyudaya Co-operative Bank, and Shamrao Vithal Co-operative Bank.
• Small Finance Banks: Small Finance Banks (SFBs) are specialized banks that focus on providing banking services to small businesses, low-income households, and unbanked individuals. SFBs were created to promote financial inclusion and serve as a source of credit for underserved populations. Examples of SFBs include Equitas Small Finance Bank, Ujjivan Small Finance Bank, and Fincare Small Finance Bank.
• Payments Banks: Payments Banks are specialized banks that focus on providing payment services, including remittances and deposits. Payments Banks were created to promote financial inclusion and serve as a source of payment services for underserved populations. Examples of Payments Banks include Paytm Payments Bank, Airtel Payments Bank, and India Post Payments Bank.

Each type of bank has its own unique characteristics, focus areas, and regulatory requirements.

Types of Bank Audit

The Bank audit process involves various TYPES OF AUDITS, including:

• Statutory Audit: This is an annual audit of the financial statements of the bank, conducted by a firm of chartered accountants, in accordance with the guidelines issued by the RBI and the ICAI.
• Internal Audit: This is an audit conducted by the internal auditors of the bank, to assess the adequacy and effectiveness of the bank's internal controls, risk management systems, and compliance with regulatory requirements.
• Concurrent Audit: This is an audit conducted by external auditors, appointed by the bank, to review the transactions and operations of the bank on a concurrent basis, and report any discrepancies or non-compliance with regulatory requirements.
• Special Audit: This is an audit conducted by external auditors, appointed by the RBI or other regulatory authorities, to investigate specific issues or irregularities in the bank's operations or financial statements.

The Main Objectives of bank audits in India are to ensure the accuracy and reliability of financial statements detect and prevent fraud and irregularities, assess the adequacy and effectiveness of internal controls and risk management systems, and ensure compliance with regulatory requirements.

Bank auditors are required to comply with various ethical and professional standards, including independence, objectivity, confidentiality, and due care. They are also required to report any material weaknesses or non-compliance with regulatory requirements to the bank's management and regulatory authorities, as appropriate.

In summary, bank audits in India play a critical role in ensuring the stability and integrity of the banking system, and are governed by various laws, regulations, and guidelines, with a focus on accuracy, reliability, and compliance.

Who can be appointed as a Bank Auditor?

As per the guidelines issued by the Reserve Bank of India (RBI), only chartered accountant firms, which are empanelled with the RBI, can be appointed as bank auditors. These firms should have at least one full-time partner who is a qualified chartered accountant, with a minimum experience of 15 years in auditing banks.

In addition, the RBI has set certain eligibility criteria for chartered accountant firms to be empanelled as bank auditors. The eligibility criteria include:

• The firm should have a minimum of 10 full-time partners, out of which at least 5 partners should have a minimum experience of 15 years in auditing banks.
• The firm should have a minimum turnover of Rs. 50 lakhs per annum from statutory audits of banks.
• The firm should have adequate infrastructure, including IT systems, to support bank audits.
• The firm should have a satisfactory track record of audit quality, compliance with regulatory requirements, and adherence to professional ethics and standards.

It is important to note that the appointment of bank auditors is subject to the approval of the RBI, and the RBI reserves the right to reject any appointment or empanelment, based on its assessment of the firm's eligibility, track record, or other factors.

Overall, only qualified chartered accountant firms, which meet the eligibility criteria and are empanelled with the RBI, can be appointed as bank auditors in India.

What is the process of Bank Audit?

Bank audit is a comprehensive review of the financial statements and internal controls of a bank. The following are the typical steps involved in a bank audit process:

• Planning and Preparation: The auditor begins by planning the audit and reviewing the bank's financial statements and internal controls. The auditor also identifies any potential risks or issues that may affect the bank's financial statements.
• Risk Assessment: The auditor evaluates the bank's risk management processes, including credit risk, market risk, operational risk, and liquidity risk. This step helps the auditor determine the nature, timing, and extent of audit procedures required.
• Audit Procedures: The auditor performs audit procedures to obtain sufficient and appropriate audit evidence to support the financial statements. The audit procedures may include analytical procedures, tests of details, and tests of controls.
• Evaluation of Internal Controls: The auditor assesses the effectiveness of the bank's internal controls, including the design and implementation of control activities, and the monitoring of controls. The auditor may also test the controls to determine if they are operating effectively.
• Reporting: The auditor prepares a report on the findings of the audit, including any significant deficiencies or material weaknesses in the bank's internal controls, as well as any material misstatements identified in the financial statements. The auditor also provides recommendations for improvement to the bank's management.
• Follow-up: After the audit is complete, the auditor may follow up with the bank's management to ensure that any recommended improvements have been implemented.

Overall, the bank audit process is designed to provide assurance to stakeholders that the bank's financial statements are accurate and reliable, and that the bank has effective internal controls in place to mitigate risks.

What are the classifications of advances as per RBI prudential norms?

The advances (loans and credit facilities) given by banks to their customers are usually classified based on their risk category and creditworthiness of the borrower. This classification is important for the bank to manage its loan portfolio effectively and to assess the risk and quality of its loan assets. The typical classifications of advances under bank audit are:

• Standard Assets: Standard assets are those loans or credit facilities where the borrower is able to repay the loan on time and in full without any default or delay. Such advances have a low credit risk and are considered safe for the bank.
• Sub-Standard Assets: Sub-standard assets are loans or credit facilities where the borrower has delayed the repayment or has defaulted for a period of more than 90 days, but less than 12 months. Such advances have a higher credit risk, and the bank may need to make provisions for the expected loss.
• Doubtful Assets: Doubtful assets are loans or credit facilities where the borrower has defaulted for a period of more than 12 months. These advances have a high credit risk, and there is a significant possibility of loss. The bank needs to make a higher provision for such assets.
• Loss Assets: Loss assets are loans or credit facilities where the bank has identified that the loan or credit facility is irrecoverable or has no security value. These advances have a very high credit risk, and the bank needs to write off such assets.
  These are classified as Non-Performing Assets(NPA).

The auditor reviews the bank's advance classification process to ensure that it is in accordance with regulatory requirements and the bank's own policies and procedures. The auditor also assesses the accuracy of the classification and the adequacy of the provisions made by the bank.